Op-Ed: Financial “Bridge” is the Responsible Approach for the Uncertain Days Ahead

Thomas Paine, an American patriot, rallied a young nation to support events occurring in Pennsylvania with the famous phrase, “These are the times that try men’s souls.”

Paine could have penned that same phrase to describe our state’s experience with the worst health emergency in 100 years: the nearly two million Pennsylvanians out of work, the thousands of shuttered businesses and organizations, the fact that the second quarter of 2020 may be the worst economic quarter in our nation’s history and our extremely challenging task to manage our budgetary obligations over the next fiscal year given the current financial position of the Commonwealth.  With monthly revenues surpassing expectations, it was a promising fiscal picture at the beginning of the year for Pennsylvania. Now, after the current crisis’s dire economic conditions, it has been totally turned on its head with the potential of the largest annual deficit in our state’s history.

Budgetary spending decisions are primarily based on historical revenue trends and experiences. Accepted public budgetary policy dictates that a jurisdiction should not project spending capacity beyond its line of sight – a level of confidence that actual revenues will match estimated revenues within a range of two percentage points. If that is not possible, then an alternative period should be considered with appropriations based on more certain projections. To proceed otherwise poses undue risk to the people and institutions that depend on reliable, predictable support from public sector fiduciaries. 

With that in mind, the question that is raised is how to proceed to ensure the most responsible financial path is taken, while providing necessary operational resources and support for state government agencies, our community partners and our citizens.  The answer is to advance a plan that is within our line of sight – a financial bridge that is sturdy enough to provide for the needs of our citizens, reliable enough to weather the turbulent currents of financial uncertainty flowing beneath it and reinforced enough to accommodate the long-term expectations of outside public markets. We need a financial bridge that meets our fiscal obligations until such time as the true probable financial picture of our Commonwealth is realized.  This sturdy, reliable financial bridge is contained within a spending plan recently advanced by the Senate Appropriations Committee and signed by Governor Wolf.

The $26 billion spending plan accommodates the extraordinary – and hopefully non-recurring – financial conditions of this time. As a general provision, it appropriates five months of funding for operations and programming throughout state government based on amounts appropriated in the 2019-2020 fiscal cycle. It will provide sufficient resources to meet the Commonwealth’s important obligations while securing adequate time to ascertain our complete financial landscape through the third quarter of 2020.

In order to accommodate several key financial stability and budgeting objectives, certain appropriations deviate from that partial-year standard. The spending plan contains a full fiscal year appropriation for general obligation debt service and contributions to our school district employee public pension system. Since outside agencies will evaluate these appropriations to determine our long-term financial stability, this full year funding ensures that our future costs of public market offerings will be as efficient as possible.

Without a doubt, our most important public obligation is to meet the needs of our young and school-age children. Early education providers, school districts and higher education institutions require greater clarity of available resources in order to effectively provide for their students for a full education cycle. Therefore, the plan proposes a full year of funding for our important educational institutions at all levels based on the amounts appropriated to them during the 2019-2020 fiscal cycle.

In recognition of the dramatic impact this crisis has had on the basic needs of Commonwealth families, full-year commitments based on current funding levels will fund food supply programs within the Department of Agriculture. In addition, full-year commitments were made to education and support programs for those who require our unmitigated admiration and support – our honorable veterans.

At approximately $26 billion, the Commonwealth will, within the responsible fiscal budgetary standards of probability, have sufficient revenue to meet its partial year 2020-2021 appropriation commitments. In addition, a clearer picture of the state’s finances heading into the fourth quarter of 2020, along with potential follow-up state revenue relief provided by the federal government, will give the General Assembly greater certainty in which to develop and advance a responsible final spending plan for the 2020-2021 fiscal year.

As in past challenging periods, with these last several months and certainly the months ahead  measuring up “as times that try men’s souls,” the people of Pennsylvania have endured and will press on to restore their Commonwealth to its historic place of greatness. This financial bridge will honor their commitment and resolve by ensuring the strongest position for recovery for Pennsylvania and its future growth and prosperity.